Yahoo Hears From Potential Bidders

Silver Lake Is Among Potential Bidders Looking at Internet Firm

By

Amir Efrati And

Joann S. Lublin

September 16, 2011

Yahoo Inc.YHOO-2.00% has been contacted by potential bidders for some or all of the Internet company, even as it focuses on stabilizing its executive ranks and bolstering its online-ad business, people familiar with the matter said.

Executives at private-equity firm Silver Lake Partners are among the potential bidders that have called Yahoo directors about a possible deal, but Yahoo hasn't met with the firm, one of the people familiar with the matter said. It wasn't clear precisely what Silver Lake proposed.

Media executive Peter Chernin has had recent discussions with Yahoo about a deal where a consortium of investors would take a stake in the company, according to people familiar with the matter. But the conversations are still at an early stage, according to these people, who said that Mr. Chernin is talking to private-equity firm Providence Equity Partners about being part of a deal.

Yahoo has been contacted by Silver Lake and other potential bidders for some or all of the company, even as it focuses on stabilizing executive ranks and bolstering its ad business. Amir Efrati has details on The News Hub.

Yahoo has signaled potential suitors that it isn't under pressure to make a deal quickly, a person familiar with the situation said.

Silver Lake and Yahoo spokeswomen declined to comment.

Yahoo directors discussed the suitors at a regularly scheduled board meeting on Wednesday, people familiar with the situation said. The firing last week of Yahoo Chief Executive Carol Bartz, has triggered questions about the Internet company's strategic direction and whether it will survive as an independent entity.

Directors have put a priority on evaluating selling all or part of the company, rather than on a CEO search, one of the people said. The board made no major decisions about Yahoo's future, however. The company's openness to a sale reflects recognition that Yahoo faces numerous long-term growth challenges amid the growing popularity of social networks like Facebook Inc. and of mobile devices and applications for them.

While Yahoo's revenue hasn't increased in recent years, the company continues to turn a profit.The company's executives are pursuing strategic initiatives, such as bidding for video site Hulu LLC and reaching a new advertising partnership with Microsoft Corp.MSFT-0.38% and AOL Inc., an effort by the three companies to better compete with Google Inc., people familiar with the matter have said.

Directors also discussed the possibility of making other strategic acquisitions or changing the type of investors holding Yahoo's stock, a person said. The board also discussed the company's internal operations under interim Chief Executive Tim Morse, people familiar with the matter said.

Yahoo's Asian holdings—a 40% stake in China-based Alibaba Group Holding Ltd. and a 35% stake in Yahoo Japan—are a focal point of the board's discussions, people familiar with the matter said. Those holdings represent one-third to one-half of Yahoo's roughly $18 billion in market value, according to analysts from B. Riley & Co. and Stifel, Nicolaus & Co.

Some private-equity firms that are considering whether to pursue a deal for Yahoo have indicated privately they wouldn't make a play unless its Asian assets were sold, making Yahoo smaller and easier to purchase.

But Yahoo's board believes some potential suitors would be interested in acquiring the entire company, a person familiar with the matter said.

Directors have ruled out a spinoff of Yahoo's Asian assets into a separate holding company because the Securities and Exchange Commission would likely oppose such a move since Alibaba's finances are largely undisclosed, a person familiar with the matter said.

Yahoo has spent months looking at ways to increase the value of its Asian assets or a sale of its stakes, people familiar with the situation have said. Such discussions have been complicated by the tax consequences of a sale and disagreements with Alibaba over the value of the Yahoo's stake in the Chinese e-commerce company, among other things, the people said.

Activist investor Daniel Loeb, whose Third Point LLC hedge fund last week disclosed holding more than a 5% stake in Yahoo, continued to blast Yahoo's management this week, calling for Yahoo's directors to step down. The company's board isn't worried about such agitation and won't try to block Mr. Loeb from obtaining more shares, people familiar with the matter said.

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